Deciding to sell your business is a big decision and most clients only go through the process once in their lifetime. It is an unfamiliar road. Even for the most adventurous, that can be unsettling.
You may be asking yourself many questions including:
Is this the right time to sell?
How long will the process take?
How much of my time is this going to take?
Do I need a business broker?
Knowledge Is Power. Understand the Steps in Selling Your Business
We believe that knowledge is power. We embrace the importance of providing you an overview of the unfamiliar road including what’s ahead and where issues may arise.
Have no fear. We are experienced business brokers who will be with you every step of the way (5 steps) and, in addition to our experience and local market knowledge, we also understand how you are feeling and the concerns you may have. We get it. Each of us are former business owners who are now business brokers. We know the anxiety and fears and want you to understand the journey ahead that we will navigate with you and on your behalf every step of the way.
Like Google maps or the navigation in your vehicle, we will provide you an overview of where we are going and together, we will forge ahead through each step in the process. Your goals shared with us during Step 1 will guide and motivate us right through Close.
We find that most business owners value context and are used to seeing the big picture with a sense of what’s next. That is why our process places emphasis on seeing the bigger picture and where we are in the process. Knowing what each step entails and what will be required of you and your team.
Offering You a Superior Experience
As business brokers, we are committed to delivering a superior experience to our clients, business owners who have decided to sell. That superior experience begins with our highly-qualified, experienced business brokers who have run their own businesses in the past and bring important local market knowledge and industry knowledge to best serve our clients. Additionally, our business brokers leverage our 5-step business brokerage process that protects your valuable time while earning your trust through every action and offering insight, guidance and creativity.
Our Five Steps to Effectively Sell Your Business and Achieve Your Goals
Step 1. Getting to Know You
Step 2. Going to Market
Step 3. Negotiations
Step 4. Due Diligence, Financing, and Legal
Step 5. Closing
If you have not had a chance to read our blogs detailing Steps 1-3 in the business brokerage process, we encourage you to read them.
This blog focuses on Step 4: Due Diligence, Financing, and Legal
The goals of this step are to complete due diligence, secure financing, and get all the legal documentation in place to move to close.
Keys to the Game
We are going to continue with a sports analogy as we have in prior blogs regarding our process, specifically talking about “Keys to the Game” related to due diligence, financing, and legal. Keys to Step 4 continue to emphasize the importance of confidentiality, professionalism (these first two are essential throughout the process), while ethics, efficiency, blocking and tackling, and effective coordination and communication emerge as especially important during this important step.
While we will explain how these characteristics and competencies are essential throughout this step in our business brokerage process, it is unfortunately late in the game to conclude that your business broker may not be ethical, professional, or efficient. We strongly recommend assessing these characteristics when you initially meet with prospective business brokers at Step 1.
In Step 3, we worked with you to negotiate an agreement for your business. Now, during Step 4, we, as your business brokers, are establishing all the mechanics and details for information sharing so the prospective buyer(s) have the next level of detail they request regarding your business in order to proceed. Maintaining confidentiality is paramount as is ensuring there is an efficient and secure system and process in place.
We have invested in technology and systems to give our clients peace of mind during the due diligence phase so that our clients know their business information is handled and shared with the utmost care. Additionally, you have both a business broker and a transaction manager to efficiently and effectively coordinate and communicate with you and the team to adeptly manage the information sharing process to ensure a smooth due diligence process.
Our Role, Your Role, and The Work to Be Done
Our role as your business broker during Step 4 is to manage and coordinate every aspect of the due diligence process that naturally leads to financing and legal. This step essentially has three sequential workflows, and you can count on us to manage and facilitate all aspects on your behalf.
Our priorities as your business broker include the following:
- Providing thorough coordination and facilitation of the due diligence information sharing process including secure data room management.
- Coordinating and supporting the process to secure and confirm financing.
- Providing weekly communication among all parties that includes the seller advisory team to align all parties while providing status updates and next steps.
- Overall quarterbacking of the process and all details during this step that include advising, counseling, navigating, and creatively addressing issues as they arise. Providing ongoing client support as stress levels may rise.
Your Role as Seller in Step 4 of Selling Your Business – Due Diligence, Financing, and Legal
Responsiveness is essential during this Step. It is important that you and key team members provide information in a timely manner and ensure it is complete. These two factors will dramatically affect the due diligence timeline.
With more buyers than sellers, buyers are carefully evaluating businesses and generally asking for more data during the due diligence process, so prepare yourself and your team that this Step in selling your business can take several months.
The Work to be Done to Sell Your Business – Keeping Your Eye on the Ball
We are your point person, just like in every other step of our process. You can count on us to be with you every step of the way and to take the lead in coordinating and facilitating.
This mindset differentiates how we serve our clients as their business broker. We are hands on, managing each step in the process with a commitment and focus on protecting your time so you can continue to manage your business. This includes working with you and your other trusted advisors as well as ensuring you delegate where possible so that you are leveraging the skills and capabilities of your team and not burdening yourself with details that will bog you down and add stress.
As the business owner, it is essential that you keep your eye on the ball and continue to run your business, and it is of paramount importance that your business keeps performing well. Any indicators of a decrease in performance during due diligence can prevent the deal moving to Step 5, Close.
Continuing with a sports analogy, think of us as quarterbacking the process, managing all members of the team (e.g., transaction attorney, CPA, financial advisor, real estate attorney) and communicating with the prospective buyers and their respective teams.
Coordination and communication are the two words that summarize our role as your business brokers during due diligence, securing financing, and legal.
Financing
While financing may be thought of as the buyer’s responsibility, it is important to note that as the business owner and seller, it is possible the final deal terms may include seller financing or other earnouts as part of the transaction details. We will guide and counsel you to strategize on creative financing options that can present additional upside benefit to maximize return.
We assess buyers to only present qualified buyers with prequalified financing so as a seller you have the peace of mind that the buyer we are now working with is well along in the process of securing financing.
Legal
While we are not transaction attorneys, we are well versed in all the details that need to get completed. During this step, our role as your business broker is quarterbacking the process, ensuring the attorneys on each side are being responsive and timely so that we can communicate with all affected parties a realistic timeline for close.
Additionally, there may be industry-specific legal nuances (e.g., license transfers) related to the sales of your business or state or local legal matters that we will coordinate with the closing attorneys related to close.
Conclusion
Step 4 of our Selling Your Business process is centered on effective and efficient information sharing. The due diligence process is a buyer-focused process where the buyer is requesting and reviewing a wealth of core business information to further assess and confirm their interest in your business. The buyers have gone from review of a Confidential Business Review to now doing a deep dive review and analysis of your business and its financials.
The deliverables from Step 4 of our business brokerage process to sell your business are as follows:
- Buyer and seller due diligence sign off.
At the conclusion of the due diligence process, both you and the buyer will sign off on the due diligence process, acknowledging you have provided, and the buyer has reviewed a documented list of materials and that both parties acknowledge the due diligence process has been completed.
- Legal documents have been drafted, finalized, and accepted including the following
- The purchase agreement with schedules
- A non-compete & non-solicitation agreement, and if applicable, a consulting agreement may be agreed to for the seller to consult with the new buyer(s).
If you are thinking about selling your business, we welcome the opportunity to discuss your goals and talk more about our business brokerage services.
Our next article to complete the review of our Business Brokerage Sales Process will summarize the final and fun step of Closing.